Federal Register / Vol. 63, No. 128 / Monday, July 6, 1998 / Notices 36457

deferred sales charge will be imposed

with respect to Class B Institutional

Service Shares.

8. The investment objectives of each

Selling Fund and its corresponding

Acquiring Fund are substantially

similar. The investment restrictions and

limitations of each Selling Fund and its

corresponding Acquiring Fund also are

substantially similar, but in some cases

involve differences that reflect the

differences in the general investment

strategies utilized by the Funds.

9. The Boards, including a majority of

Independent Directors, approved the

Reorganizations in the best interests of

existing shareholders of the Funds and

determined that the interests of existing

shareholders will not be diluted. The

Boards considered a number of factors

in authorizing the Reorganizations,

including: (a) The terms and conditions

of the Reorganizations; (b) whether the

Reorganizations would result in the

dilution of shareholders’ interests; (c)

expense ratios of the Funds, fees and

expenses of the Reorganizations; (d) the

comparative performance records of the

Funds; (e) compatibility of the Funds’

investment objectives and policies; (f)

the investment experience, expertise

and resources of the Funds’ advisers; (g)

service features available to

shareholders of the respective Acquiring

Fund and Selling Fund; (h) the fact that

FUNB will bear the expenses incurred

by the Funds in connection with the

Reorganizations; (i) the fact that the

Acquiring Funds will assume the

identified liabilities of the Selling

Funds; and (j) the expected federal

income tax consequences of the

Reorganizations. FUNB will pay the

expenses of the Reorganizations other

than the Acquiring Funds’ federal and

state registration fees.

10. The Plans may be terminated by

either the Selling or Acquiring Fund at

or prior to the Closing Date if the other

party breaches any provision of a Plan

that was to be performed and the breach

is not cured within 30 days or a

condition precedent to the terminating

party’s obligations has not been met and

it appears that the condition precedent

will not or cannot be met.

11. Registration statements on Form

N–14 containing preliminary combined

prospectus/proxy statements for each

Fund Reorganization, were filed with

the SEC between April 10, 1998 and

June 10, 1998. A final prospectus/proxy

was mailed to shareholders of the

Selling Funds on June 10, 1998, except

for the CoreFunds Global Bond Fund

the prospectus/proxy for which will be

mailed on or about July 10, 1998. A

special meeting of the Selling Funds’

shareholders will be held on or about

July 17, 1998 for all Selling Funds

except for the CoreFunds Global Bond

Fund the meeting of whose shareholders

will be held on or about August 17,

1998.

12. The consummation of each

Reorganization under the Plans is

subject to a number of conditions

precedent, including: (a) The Plans have

been approved by the Boards and each

of the Funds’ shareholders in the

manner required by applicable law; (b)

management of each Selling Fund

solicits proxies from its shareholders

seeking approval of the Reorganizations;

(c) the Funds have received opinions of

counsel stating, among other things, that

each Reorganization will not result in

federal income taxes for the Fund or its

shareholders; and (d) the Funds have

received from the SEC an order

exempting the Reorganizations from the

provisions of section 17(a) of the Act.

Applicants agree not to make any

material changes to the Plans that affect

the application without prior SEC

approval.

Applicants’ Legal Analysis

1. Section 17(a) of the Act generally

prohibits an affiliated person of a

registered investment company, or any

affiliated person of the person, acting as

principal, knowingly from selling any

security to, or purchasing any security

from the company. Section 2(a)(3) of the

Act defines the term affiliated person of

another person to include: (a) Any

person directly or indirectly owning,

controlling, or holding with power to

vote, 5% or more of the outstanding

voting securities of the other person; (b)

any person 5% or more of whose

outstanding voting securities are

directly or indirectly owned, controlled,

or held with power to vote, by the other

person; (c) any person directly or

indirectly controlling, controlled by, or

under common control with, the other

person; and (d) if the other person is an

investment company, any investment

adviser of the person.

2. Rule 17a–8 under the Act exempts

from the prohibitions of section 17(a) of

the Act mergers, consolidations, or

purchases or sales of substantially all of

the assets of registered investment

companies that are affiliated persons

solely by reason of having a common

investment adviser, common directors,

and/or common officers, provided that

certain conditions are satisfied.

3. Applicants believe that they cannot

rely on rule 17a–8 under the Act

because the Funds may be affiliated for

reasons other than those set forth in the

rule. The Selling Funds may be

affiliated persons of FUNB because

FUNB, as fiduciary for its customers,

owns of record 5% or more of the

outstanding securities of the Selling

Funds. FUNB, in turn, is an affiliated

person of the Acquiring Funds because

FUNB, or one of its affiliates, serves as

adviser to the Acquiring Funds. In

addition, the Acquiring Funds may be

affiliated persons of FUNB because

FUNB, as fiduciary for its customers,

owns of record 5% or more of the

outstanding securities of the Acquiring

Funds.

4. Section 17(b) of the Act provides

that the SEC may exempt a transaction

from section 17(a) of the Act if evidence

establishes that (a) the terms of the

proposed transaction, including the

consideration to be paid, are reasonable

and fair and do not involve

overreaching on the part of any person

concerned; (b) the proposed transaction

is consistent with the policy of each

registered investment company

concerned; and (c) the proposed

transaction is consistent with the

general purposes of the Act.

5. Applicants request an order under

section 17(b) of the Act exempting them

from section 17(a) of the Act to the

extent necessary to consummate the

Reorganizations. Applicants submit that

the Reorganizations satisfy the

provisions of section 17(b) of the Act.

Applicants state that the Board of each

of the Funds has determined that the

transactions are in the best interests of

the shareholders and that the interests

of the existing shareholders will not be

diluted as a result of the

Reorganizations. In addition, applicants

state that the exchange of the Selling

Funds’ shares for shares of the

Acquiring Funds will be based on the

relative net asset values.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–17783 Filed 7–2–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–23288; File No. 812–11004]

Phoenix Home Life Mutual Insurance

Company, et al.; Notice of Application

June 26, 1998.

AGENCY: Securities and Exchange

Commission (‘‘Commission’’

ACTION: Notice of application

(‘‘Application’’) for order pursuant to

Section 26(b) and Section 17(b) of the

Investment Company Act of 1940 (the

‘‘Act’’ or the ‘‘1940 Act’’).
36458 Federal Register / Vol. 63, No. 128 / Monday, July 6, 1998 / Notices

Summary of Application: Applicants

seek an order approving the proposed

substitution of shares of the Phoenix

Money Market Series of the Phoenix

Edge Series Fund (the ‘‘Substitute

Fund’’) for shares of the Templeton

Money Market Series of the Templeton

Variable Products Series Fund (the

‘‘Current Fund’’)(the ‘‘Substitution’’).

Applicants also seek an order pursuant

to Section 17(b) of the Act granting

exemptions from Section 17(a) to permit

Applicants to: (1) effect the Substitution

by redeeming shares of the Current

Fund in-kind and using the proceeds to

purchase shares of the Substitute Fund;

and (2) merge two investment divisions

of Phoenix Home Life Variable

Accumulation Account (the ‘’Account’’)

which will be holding shares of the

same Substitute Fund as a result of the

Substitution.

Applicants: Phoenix Home Life

Mutual Insurance Company (‘‘Phoenix’’)

and the Account.

Filing Date: The application was filed

on February 12, 1998.

Hearing or Notification of Hearing: An

order granting the application will be

issued unless the Commission orders a

hearing. Interested persons may request

a hearing by writing to the Secretary of

the Commission and serving Applicants

with a copy of the request, personally or

by mail. Hearing requests must be

received by the Commission no later

than 5:30 p.m. on July 21, 1998, and

must be accompanied by proof of

service on the Applicants in the form of

an affidavit or, for lawyers, a certificate

of service. Hearing requests should state

the nature of the requester’s interest, the

reason for the request, and the issues

contested. Persons who wish to be

notified of a hearing may request

notification by writing to the Secretary

of the Commission.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 Fifth Street,

NW, Washington, DC 20549.

Applicants, c/o Phoenix Home Life

Mutual Insurance Company, One

American Row, P.O. Box 5056, Hartford,

Connecticut 06102–5056.

FOR FURTHER INFORMATION CONTACT:

Keith E. Carpenter, Senior Counsel, or

Kevin M. Kirchoff, Branch Chief, Office

of Insurance Products, Division of

Investment Management, at (202) 942–

0670.

SUPPLEMENTARY INFORMATION: the

following is a summary of the

application. The complete application is

available for a fee from the Public

Reference Branch of the Commission

(tel. (202) 942–8090).

Applicants’ Representations

1. Phoenix is a mutual insurance

company existing under New York law

and is licensed to do business in all

states, as well as in the District of

Columbia and Puerto Rico. Phoenix

offers individual and group variable

immediate and deferred annuity

contracts and single premium and

flexible premium variable life insurance

policies.

2. Phoenix established the Account on

June 21, 1982, pursuant to the

provisions of the insurance laws of the

state of Connecticut. The Account is a

segregated investment account

registered with the Commission as a

unit investment trust pursuant to the

provisions of the 1940 Act. The Account

is divided into subaccounts

(‘‘Subaccounts’’) that correspond to the

portfolios of the Phoenix Edge Series

Fund (the ‘‘Phoenix Trust’’) and the

Templeton Variable Products Series

Fund (the ‘‘Templeton Trust’’),

including the Phoenix Money Market

Series (the ‘‘Phoenix Fund’’) and the

Templeton Money Market Series (the

‘‘Templeton Fund’’). The Account

serves as the funding medium for

certain variable annuity contracts issued

and administered by Phoenix. WS

Griffith & Co., Inc. serves as principal

underwriter for the flexible premium

variable annuity contract (the

‘‘Contract’’) involved in the

Substitution.

3. The deferred variable annuity

Contract offered by the Account

currently provides for investment in five

Subaccounts, each of which invests

solely in shares of a different portfolio

of the Templeton Trust.

4. On April 18, 1986, the Phoenix

Trust filed its initial registration

statement with the Commission on

Form N–1A under the Securities Act of

1933 (‘‘1933 Act’’) and the 1940 Act.

The Phoenix Trust is a series type

investment company, organized as a

Massachusetts business trust on

February 18, 1986, that currently has ten

separate investment portfolios (referred

to individually as a ‘‘Fund’’) that have

differing investment objectives, policies

and restrictions. Each Fund is managed

in compliance with diversification

requirements under the Internal

Revenue Code of 1986, as amended, (the

‘‘Code’’). Shares of the Funds of the

Phoenix Trust are currently sold only to

separate accounts of Phoenix and its

affiliates to fund variable life insurance

policies or variable annuity contracts.

Phoenix Investment Counsel, Inc. (the

‘‘Phoenix Adviser’’) serves as

investment adviser to the Phoenix Fund.

5. On February 25, 1988, the

Templeton Trust filed its initial

registration statement with the

Commission on Form N–1A under the

1993 Act and the 1940 Act. The

Templeton trust is a series type

investment company, organized as a

Massachusetts business trust on

February 25, 1998, that currently has

nine separate investment portfolios

(referred to individually as a ‘‘Fund’’)

that have differing investment

objectives, policies and restrictions.

Each Fund is managed in compliance

with diversification requirements under

the Code. Shares of the Funds of the

Templeton Trust are sold only to

insurance company separate accounts to

fund variable life insurance policies or

variable annuity contracts. Templeton

Investment Counsel, Inc. (the

‘‘Templeton Adviser’’) services as

investment adviser to the Templeton

Fund.

6. The Templeton Fund as an

individual investment alternative has

not generated substantial interest of

holders of Contracts (‘‘Owners’’) in

recent years. On December 31, 1997, the

Templeton Fund had $15.77 million in

assets, compared to $14.09 million at

the end of 1996, $20.72 million at the

end of 1995 and $33.09 million at the

end of 1994, an aggregate decrease of

52% from 1994 to 1997 and 57.4% from

1994 to 1996.

7. Applicants believe the Phoenix

Fund, with assets of $126.48 million on

December 31, 1997, offer Owners a

larger fund with similar investment

policies, providing a potential for

economies of scale. The Applicants

believe that they can better serve the

interests of Owners by using the

Phoenix Fund rather than the

Templeton Fund as a funding vehicle

for the Contracts.

8. Phoenix proposes to effect a

substitution of shares of the Phoenix

Fund for all shares of the Templeton

Fund attributable to the Contract.

Phoenix will pay all expenses and

transaction costs associated with the

Substitution, including any applicable

brokerage commissions. Applicants

state that concurrent with the filing of

the Application with the Commission,

Phoenix will have filed with the

Commission and mailed to Owners a

supplement to the prospectus of the

Account to provide Owners and

prospective investors with information

concerning the proposed Substitution.

9. Phoenix will schedule the

Substitution to occur as soon as

practicable following the issuance of the

requested order so as to maximize the

benefits to be realized from the

Substitution.
Federal Register / Vol. 63, No. 128 / Monday, July 6, 1998 / Notices 36459

10. Within five days after the

Substitution, Phoenix will send to

Owners written notice of the

Substitution (the ‘‘Notice’’) that

identifies the shares of the Templeton

Fund that have been eliminated and the

shares of the Phoenix Fund that have

been substituted. Owners will be

advised in the Notice that for a period

of 30 days from the mailing of the

Notice, Owners may transfer all assets,

as substituted, to any other available

Subaccount, without limitation and

without charge. Moreover, any ownerinitiated transfers of all available assets

from the Subaccount investing in the

Phoenix Fund to a Subaccount investing

in certain other portfolios of Templeton

Variable Products Series Fund, from the

date of the Notice to 30 days thereafter,

will not be counted as transfer requests

under any contractual provisions of the

Contracts that limit the number of

allowable transfers. The period from the

date of the Notice to 30 days thereafter

is referred to herein as the ‘‘Free

Transfer Period.’’

11. Following the Substitution,

Owners will be afforded the same

contract rights, including surrender and

other transfer rights with regard to

amounts invested under the Contracts,

as they currently have. Any applicable

contingent deferred sales loads will be

imposed.

12. Immediately following the

Substitution, Phoenix will combine the

Subaccount invested in the Templeton

Fund with the Subaccount invested in

the Phoenix Fund. Phoenix will reflect

this treatment in disclosure documents

for the Account, the Financial

Statements of the Account and the Form

N–SAR annual reports filed by the

Account.

13. Phoenix will redeem all shares of

the Templeton Fund it currently holds

on behalf of the Account at the close of

business on the effective date of the

Substitution. In connection with the

redemption of all shares of the

Templeton Fund held by Phoenix, it is

expected that the Templeton Fund will

incur brokerage fees and expenses in

connection with such redemption. To

reduce the impact of such fees and

expenses on the Templeton Fund, the

redemption of shares will be effected

partly for cash and partly for portfolio

securities redeemed ‘‘in-kind.’’ By this

procedures, at the effective date of the

Substitution, the Templeton Fund will

transfer to the Account cash proceeds

and/or portfolio securities held by the

Templeton Fund and the Account will

use such cash proceeds and/or portfolio

securities to purchase shares of the

Substitute Fund. The Templeton Trust

will effect the redemption-in-kind and

the transfers of portfolio securities in a

manner that is consistent with the

investment objectives and policies and

diversification requirements applicable

to the Substitute Fund. Phoenix will

take appropriate steps to assure that the

portfolio securities selected by the

Templeton Adviser for redemptions-inkind are suitable investments for the

Substitute Fund. In effecting the

redemption-in-king and transfers, the

Templeton Trust will comply with the

conditions of Rule 18f–1 under the 1940

Act.

14. The portfolio securities redeemed

in-king will be used together with the

cash proceeds to purchase the shares of

the Substitute Fund. The Applicants

have determined that partially effecting

the redemption of shares of the

Templeton Fund in-kind is appropriate,

based on the current similarity of

certain of the portfolio investments of

the Templeton Fund to those of the

Substitute Fund. The valuation of any

‘‘in-kind’’ redemptions will be made on

a basis consistent with the normal

valuation procedures of the Templeton

Fund and the normal valuation

procedures of the Substitute Fund.

15. In all cases, Phoenix, on behalf of

the Account, will simultaneously place

redemption requests with the

Templeton Fund and purchase orders

with the Substitute Fund so that

purchases will be for the exact amount

of the redemption proceeds. As a result,

at all times, monies attributable to

Owners whose funds are currently

invested in the Templeton Fund will

remain fully invested.

16. The full net asset value of the

redeemed shares held by the Account

will be reflected in the Owners’

accumulation unit or annuity unit

values following the Substitution.

Phoenix hereby undertakes to assume

all transaction costs and expenses

relating to the Substitution, including

any direct or indirect costs of

liquidating the assets of the Templeton

Fund, so that the full net asset value of

the redeemed shares of the Templeton

Fund held by the Account will be

reflected in the Owners’ accumulation

unit or annuity unit values following

the Substitution.

17. The Templeton Adviser and the

Phoenix Adviser have been fully

advised of the terms of the Substitution.

Phoenix anticipates that the Templeton

Adviser and the Phoenix Adviser, to the

extent appropriate, will conduct the

trading of portfolio securities in a

manner that provides for the anticipated

redemptions of shares held by the

Account.

Applicant’s Legal Analysis

1. Section 26(b) of the Act makes it

unlawful for any depositor or trustee of

a registered unit investment trust

holding the security of a single issuer to

substitute another security for such

security unless the Commission

approves the substitution. The

Commission will approve a substitution

if the evidence establishes that it is

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the Act.

2. The purpose of Section 26(b) is to

protect the expectation of investors in a

unit investment trust that the unit

investment trust will accumulate shares

of a particular issuer by preventing

unscrutinized substitutions which

might, in effect, force shareholders

dissatisfied with the substituted security

to redeem their shares, thereby possibly

incurring either a loss of the sales load

deducted from initial premium

payments, an additional sales load upon

reinvestment of the redemption

proceeds, or both. Moreover, in the

insurance product context, a

contractowner forced to redeem is very

likely to suffer adverse tax

consequences. Section 26(b) affords this

protection to investors by preventing a

depositor or trustee of a unit investment

trust holding the shares of one issuer

from substituting for those shares of

another issuer, unless the Commission

approves that substitution.

3. The Substitution involves: (a)

Funds with substantially identical

investment objectives, policies and

restrictions; (b) Funds with comparable

investment strategies and levels of risk

exposure; (c) a Substitute Fund

exhibiting equivalent or better prior

investment performance than the

Current Fund; and (d) a Substitute Fund

with a substantially larger size than the

Current Fund, which should promote

greater economies of scale that may help

to lower expense ratios and further

improve investment performance.

Applicants therefore believe that their

request for an order of approval satisfies

the standards for relief of Section 26(b).

4. The Substitution will not result in

the type of costly forced redemption

that Section 26(b) was intended to guard

against and, for the following reasons, is

consistent with the protection of

investors and the purposes fairly

intended by the Act:

(a) The Substitution involves interests

that have objectives, policies and

restrictions the same as or substantially

similar to the objectives, policies and

restrictions of the Fund being replaced

so as to continue fulfilling
36460 Federal Register / Vol. 63, No. 128 / Monday, July 6, 1998 / Notices

contractowners’ objectives and

expectations.

(b) The costs of the Substitution will

be borne by the Applicants and will not

be borne by contractowners. No charges

will be assessed to effect the

Substitution.

(c) The Substitution will, in all cases,

be at net asset values of the respective

shares without the imposition of any

transfer or similar charge and with no

change in the amount of any

contractowner’s account value.

(d) The proposed Substitution will

not cause fees and charges under the

Contracts currently being paid by

contractowners to be greater after the

proposed Substitution than before the

proposed Substitution.

(e) The contractowners have been

given notice of the Substitution and will

have an opportunity to reallocate

contract values among other available

Funds without the imposition of any

transfer charge or limitation, nor will

any such transfers from the date of the

initial notice through a date 30 days

following the Substitution count against

the number of free transfers permitted in

a year.

(f) Within five days after the

Substitution, Phoenix will send to

contractowners written Notice that the

Substitution has occurred, identifying

the Fund that was substituted and

disclosing the Substitute Fund.

(g) The Substitution will in no way

alter the insurance benefits to

contractowners or the contractual

obligations of Phoenix.

(h) The Substitution will in no way

alter the tax benefits to contractowners.

Counsel for Phoenix has advised that

the Substitution will not give rise to any

tax consequences to the contractowners.

5. Section 17(a)(1) of the Act prohibits

any affiliated person, or an affiliate of an

affiliated person, of a registered

investment company from selling any

security or other property to such

registered investment company. Section

17(a)(2) of the Act prohibits any

affiliated person from purchasing any

security or other property from such

registered investment company.

6. Applicants anticipate that the

Substitution will be effected by

redeeming shares of the Current Fund

in-kind and then using those assets to

purchase shares of the Substitute Fund.

This redemption and purchase in-kind

involves the purchase of property from

the Current Fund by the separate

account, an affiliated person of that

Fund, and the sale of property to the

Substitute Fund by the separate

account, which may be considered an

affiliate of the Substitute Fund.

7. Similarly, where two investment

divisions holding shares of the same

Substitute Fund are combined into a

single investment division, the transfer

of assets could be said to involve

purchase and sale transactions between

the investment divisions by an affiliated

person.

8. Applicants request an order

pursuant to Section 17(b) of the Act

exempting the in-kind redemption and

purchase and the merger of certain

investment divisions from the

provisions of Section 17(a). Section

17(b) of the Act provides that the

Commission shall grant an order

exempting a proposed transaction from

Section 17(a) if evidence establishes

that: (a) the terms of the proposed

transaction, including the consideration

to be paid or received, are reasonable

and fair and do not involve

overreaching on the part of any person

concerned; (b) the proposed transaction

is consistent with the policy of each

registered investment company; and (c)

the proposed transaction is consistent

with the general purposes of the Act.

9. Applicants represent that the terms

of the in-kind redemption and purchase

are reasonable and fair and do not

involve overreaching on the part of any

person concerned and that the interests

of contractowners will not be diluted.

The in-kind redemption and purchase

will be done at values consistent with

the objectives and policies of both the

Current and Substitute Funds. The asset

transfers will be reviewed to assure that

the assets meet the objectives and

policies of the Substitute Fund and that

they are valued under the appropriate

valuation procedures of the Current and

Substitute Funds. In-kind redemption

and purchase will reduce the brokerage

costs that would otherwise be incurred

in connection with the Substitution.

10. Applicants represent that the

merger of the investment divisions is

intended to reduce administrative costs

and thereby benefit contractowners with

assets in those investment divisions.

The purchase and sale transactions will

be effected based on the net asset value

of the shares held in the investment

divisions and the value of the units of

the investment division involved.

Therefore, there will be no change in

value to any contractowner.

Conclusion

For the reasons summarized above,

Applicants assert that the requested

orders meet the standards set forth in

Sections 26(b) and 17(b), respectively,

and should, therefore, be granted.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–17715 Filed 7–2–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 35–26891]

Filings Under the Public Utility Holding

Company Act of 1935, as Amended

(‘‘Act’’)

June 26, 1998.

Notice is hereby given that the

following filling(s) has/have been made

with the Commission pursuant to

provisions of the Act and rules

promulgated under the Act. All

interested persons are referred to the

application(s) and/or declaration(s) for

complete statements of the proposed

transactions(s) summarized below. The

application(s) and/or declaration(s) and

any amendments is/are available for

public inspection through the

Commission’s Office of Public

Reference.

Interested persons wishing to

comment or request a hearing on the

application(s) and/or declaration(s)

should submit their views in writing by

July 21, 1998, to the Secretary,

Securities and Exchange Commission,

Washington, D.C. 20549, and serve a

copy on the relevant applicant(s) and/or

declarant(s) at the address(es) specified

below. Proof of service (by affidavit or,

in case of an attorney at law, by

certificate) should be filed with the

request. Any request for hearing should

identify specifically the issues of fact or

law that are disputed. A person who so

requests will be notified of any hearing,

if ordered, and will receive a copy of

any notice or order issued in the matter.

After July 21, 1998, the application(s)

and/or declaration(s), as filed or as

amended, may be granted and/or

permitted to become effective.

New England Electric System (70–9167)

New England Electric System

(‘‘NEES’’), 25 Research Drive,

Westborough, Massachusetts 01582, a

registered holding company, has filed a

post-effective amendment to its

declaration under sections 6(a) and 7 of

the Act and rule 54 under the Act.

By order dated March 25, 1998 (HCAR

No. 26849) (‘‘March Order’’), the

Commission authorized NEES to issue,

no later than December 31, 2002, up to

one million shares of its common stock

to be used to acquire the stock or assets